Account holders may use an AFT to contribute to these or another savings account regularly. Saving and budgeting: Some banks offer Vacation Club or Christmas Club savings accounts as tools for customers to save.Thus, if you want to earn better returns on your savings account deposits, you can set-up a sweep-in or flexi fixed deposit facility with a non-primary savings account and create a corpus that you can dip into only during emergencies. So, if the FD tenor was for a year but you withdrew a sum within 45 days, then the interest applicable will only be for 45 days. This is because the interest is calculated taking into account the number of days the FD was with the bank. If you make withdrawals frequently from the FD, you will lose out on interest, no matter how much you put into the account. Over the month, as you pay against different expenses, the amount in the savings account gets depleted, and some of your FDs will be liquidated to move the money into the savings account. This is because each time your income comes into the auto-sweep savings account, the amount over the MAB would be converted into one or more FDs. Shetty said, “It is better to not use the auto-sweep as your primary/expense account. While most banks do not have a penalty for breaking the auto-sweep FDs, the facility should be used cautiously. “In general, the LIFO method will earn better because the first FD sweep earns interest for a longer period," said Shetty. How the funds move between the savings account and the FD can also vary between 'Last In First Out (LIFO) or on 'First In First Out (FIFO). “In the first place, though some banks may allow you to set the minimum average balance (MAB) beyond which the money in your savings account would be moved to an FD, most banks have a fixed MAB and threshold limit of the FD.
“Before investing, depositors should study the terms regarding minimum threshold, the methodology followed for reversing funds along with the other factors," said Agarwal.Īdhil Shetty, CEO, explained that banks have different structures for their auto-sweep facility, and it is essential to understand them clearly to leverage them effectively. Agarwal said that while sweep in deposits provides flexibility, they should be chosen only if the depositor can hold funds for longer periods and not have too many transactions. How you should make these facilities work effectivelyĪlthough sweep in and flexi- fixed deposits provide better returns along with liquidity, these facilities are particularly useful for building up your emergency funds. Furthermore, in case of sweep in deposits, amounts are automatically swept out, without any penalty, when the savings balance falls short. The depositor opting for a flexi FD gets the benefit of both the liquidity of savings accounts and the high returns of fixed deposits.Īs mentioned, in a flexi deposit, the depositor has to manually open the deposit for the desired tenure, whereas in a sweep in deposits, any amount above a threshold gets swept into a fixed deposit. In flexi- fixed deposit, the depositor is required to manually add money to their deposit account. In some cases, the interest may not be compounded too," said Mrin Agarwal, Founder Director, Finsafe India Pvt Ltd.Ī flexi-fixed deposit is a special kind of deposit scheme offered by banks. “Sweep in deposits are for longer periods like 181 days or 366 days and are typically available only to premium account holders.
Hence, the bank will automatically transfer the excess of ₹20,000 to your linked FD account. In such a case, your bank balance will rise to ₹70,000 which in this case will be ₹20,000 above the limit you had set. Let’s say, your current balance is ₹40,000 and you received ₹30,000 from a client that you transferred to your savings account. Now, when you opt for the sweep-in facility, you will have to set a limit (for example ₹50,000) beyond which any amount will get automatically transferred to the FD account. When the balance in the savings account goes beyond that limit, the surplus balance gets automatically transferred to the linked fixed deposit account.įor instance, you have linked your savings account with your sweep in FD account for one year. To avail this facility, the savings account holder needs to set a specific money transfer limit for a specific period of tenure (the tenure of the deposit is normally one year but it can vary and go up to five years, and the interest rates can vary accordingly).
The banks provide sweep-in fixed deposit facility to their customers wherein customer’s saving account gets linked to a fixed deposit account.
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